While the Biden administration made headlines with its recent antitrust lawsuits against Apple, Google and Ticketmaster, its actions in the healthcare industry ran under the radar.
Last month, the Justice Department announced a new task force on Health Care Monopolies and Collusion. Jonathan Kanter, assistant attorney general for antitrust, said the group’s mission was to “identify and root out monopolies and collusive practices” that increased costs and decreased quality of care.
The task force was announced months after Justice launched an antitrust investigation into UnitedHealth, America’s largest health insurer.
“I think it’s important to not focus on any one specific matter,” Kanter said at the 2024 Stigler Center Antitrust and Competition Conference. “Because I think the body of work, and it’s really across both agencies, speaks more to the progress I believe that we’re making.”
Despite the lofty rhetoric, Kanter and ally Lina Khan, the chair of the Federal Trade Commission, have a mixed court record.
While Khan’s FTC successfully prevented four hospital mergers and a separate merger involving Aon and Willis Towers Watson insurance, it’s suffered several high-profile failures.
This includes last year’s purchase of virtual reality fitness company Within by Meta and Amgen’s purchase of Horizon Therapeutics. Justice lost an attempt to block UnitedHealth’s buy of technology firm Change Healthcare in 2022.
Khan touted her agency’s failed antitrust action against Texas firm Welsh, Carson, Anderson & Stowe, a group heavily involved in anesthesiology investing, as proof that the federal government’s lawsuit spree prevented further consolidation in the healthcare market. But there’s evidence that hospitals have pivoted away from consolidation without prompting from the government.
Research by healthcare financial advisory firm KaufmanHall revealed an average of 71 hospital and health system mergers and acquisitions annually from 2018 to 2023. That’s down from almost 104 yearly between 2012 and 2017. Investors seem leery due to market dynamics, not regulatory activity.
Traditions Health, once known for its hospice investing, appears tired of constantly being approached about buying smaller companies. According to a source familiar with the company’s practices, the strategy change happened in 2022.
Health industry insiders have noted a trend of serial founders cloning businesses to sell off to investment funds. The founders’ behavior, not any antitrust concerns, has put investors off buyouts. In Traditions’ case, that theory may be validated by the fact that the company is suing Christopher Willis — an apparent serial founder in the senior care and hospice space — for allegedly starting a clone business called Luminos to the one he previously founded and sold to Traditions, all while still under the non-compete he had to sign as part of the first sale.
Traditions accused Willis and/or his associates in court documents of engaging in hacking, theft, HIPAA violations, and “seeding confusion and causing chaos and trauma” to hospice patients, who by definition are in their final six months of life, “solely out of their self-interest of padding their financial bottom line.”
Policy experts said that consolidation caused inefficiency.
“It’s the result of various public policies that make it more profitable to be bigger because it enables providers to charge higher prices than they would be able to in a more competitive market,” said Michael F. Cannon, healthcare policies studies director at the Cato Institute.
Cannon blamed federal and state policy for encouraging excessive health insurance, which means insurance companies buy more healthcare than necessary. He said this encourages consolidation within hospitals and insurance companies “so they can have more negotiating power” on prices.
Hospital and insurance groups pointed the finger at each other.
The Association of American Medical Colleges, a nonprofit representing medical schools and 400 academy health systems, sent a letter to the federal government this month defending the “strategic combination of hospitals and health systems.”
The letter lobbied the government to use antitrust against health insurers.
Health insurance company lobbyists blamed hospital consolidation for higher prices. AHIP said in 2021 that “increased government enforcement” was needed to prevent further hospital concentration.
Cannon argued that there was a simple solution: reduce regulations.
“Roll back all of those things that the government is doing to encourage inefficient market concentration. Lower the regulatory burden broadly. That reduces the (ability of firms to profit) from inefficient consolidation.”
